Renting versus Owning and the Role of Human Capital: Evidence from Germany

Renting versus Owning and the Role of Human Capital: Evidence from Germany
Schulz, Rainer; Wersing, Martin; Werwatz, Axel
2013-04-20 00:00:00
In a world with complete markets, the decision whether to rent or buy a home is not influenced by risks related to human capital. If markets are incomplete and have frictions, however, this may change. Renting should become more likely the more mobile a household has to be and the more income risk can be diversified. Using household panel data from Germany, we test both predictions. We find that mobility requirements have a positive effect on the probability of renting. This effect is robust even after controlling for state dependence, unobserved heterogeneity and other factors known to influence the tenure mode choice. Our data, however, does not support the hypothesis that the potential to diversify net income risk when renting affects the tenure mode choice.
http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.pngThe Journal of Real Estate Finance and EconomicsSpringer Journalshttp://www.deepdyve.com/lp/springer-journals/renting-versus-owning-and-the-role-of-human-capital-evidence-from-mhF69HvnQp

Renting versus Owning and the Role of Human Capital: Evidence from Germany